Entrepreneurs adjust to new funding era

Professor Mark Hart and Professor Jonathan Levie
Professor Mark Hart and Professor Jonathan Levie
27 April 2011

A new generation of entrepreneurs who will play a role in Britain’s future economic growth and prosperity is emerging with a little help from family and friends, according to a new report from Global Entrepreneurship Monitor (UK).

Overall, a recovery of entrepreneurial attitudes and intentions to 2008 levels was evident in the UK in 2010 after a slight dip in 2009.  Nine out of ten start-up and new entrepreneurs in the UK in 2010 were opportunity-driven, findings show, which was higher than in most G7 nations, including the US.

In addition, the percentage of non-entrepreneurs in the UK who agreed there were good opportunities for starting a business in their local area in the next six months rose for the first time since 2007: from 23 per cent in 2009 to 27 per cent in 2010.

GEM research also found that around half (47%) of early-stage entrepreneurs in the UK thought that starting a business was less difficult than a year ago, up from around a third (35%) in 2009.  Similarly, 38% of established business managers in the UK thought that starting a business was less difficult than a year ago, up from 24% in 2009.  More UK early-stage entrepreneurs and established business owner-managers had higher expectations for business growth than a year ago.

The report, entitled Global Entrepreneurship Monitor (GEM) UK 2010, published today, was written by Professor Mark Hart from Aston Business School and Dr Jonathan Levie from the Hunter Centre for Entrepreneurship in Strathclyde Business School.

Professor Mark Hart said:

“Entrepreneurship is more important now than ever. While early stage entrepreneurial activity has not changed much for many years, last year saw a recovery in people’s entrepreneurial attitudes, intentions and aspirations after a dip in 2009.”

However, the climate for funding start-ups remained difficult in 2010, with some evidence of increased risk aversity among all types of funders, including firm founders.   This adjustment to the new, more risk-averse funding climate, according to Dr Jonathan Levie, was reflected in:

“...an increased reliance by start-up entrepreneurs on ‘love money’ - cash from close friends and family. We also found that twice as many people reported being informal investors in start-up businesses in our 2010 survey than in any previous year. Love money, coupled with ambition and desire to succeed, has enabled many emerging entrepreneurs to combat the financial crisis.”

The report also revealed some differences in entrepreneurial activity across the home nations of the UK. For the second year running, early-stage entrepreneurial activity in Scotland was less than two-thirds of the English rate, while Northern Ireland had the lowest ratio of female to male early-stage entrepreneurial activity.  Only 16% of the non-entrepreneurially active population in Northern Ireland agreed that there were good start-up opportunities in their local area in the next 6 months. This is significantly below England (28%) for a second year running, and may reflect the ongoing economic crisis in the neighbouring economy of the Republic of Ireland and the way in which the economic fortunes of these two parts of Ireland are interconnected.

The GEM UK Report 2010 surveyed more than 10,000 people in the four home nations of the UK. The Global Entrepreneurship Monitor is the largest and most comprehensive international study of its kind of entrepreneurial attitudes, activities, and aspirations.

Download the Global Entrepreneurship Monitor UK 2010 Monitoring Report

For all media enquiries, please contact Dhiren Katwa, Press Officer at Aston Business School, on 0121 204 4954 or email [email protected]